Russia beats Saudi to emerge as world’s biggest oil producer in 2012

Russia beats Saudi to emerge as biggest oil producer in 2012

Rosneft reported one of the largest rises in crude output among the Russian oil majors last year

More crude from state-owned top producer Rosneft kept Russian oil output the highest in the world last year, ahead of Saudi Arabia, Energy Ministry data showed on Wednesday.

Crude output edged up almost 1% to a new post-Soviet high of 10.37 million barrels per day (bpd), but the increase could halt this year due to depleted oil fields in West Siberia.

Russia’s oil output, the world’s largest, edged up almost 1% in 2012 to a new post-Soviet average yearly high of 10.37 million barrels per day (bpd).

In 2011, Russia’s oil output reached a yearly post-Soviet record high of 10.27 million bpd thanks to production at Rosneft’s new Vankor oilfield.

According to the International Energy Agency, the industrialised nations’ energy watchdog, Russia’s oil production peaked at 11.41 million bpd in 1988, when it was part of the former Soviet Union. Russia accounted for 90 percent of total Soviet oil output. In the early 1990s, marketing of Russian oil was concentrated in the hands of the former Soviet state marketing organisation Soyuznefteexport, later renamed Nafta Moskva.

In the final days of the Soviet Union, Russia’s oil output fell to 10.4 mbpd in 1991, down 9.5 percent from 1990 and down 17.7 percent from the 1988 peak. Many analysts say the slump in oil production and prices were the main reasons for the fall of the 70-year-old Communist empire.

In 1996, when Boris Yeltsin was re-elected as Russia’s president, oil production declined, starting a three-year period of stagnation amid underinvestment and slowing demand.

Russian oil output fell by about 1 percent in 2008 from the previous year to around 9.8 mbpd, the first decline in a decade as crude prices collapsed by the end of that year as a consequence of a worldwide economic downturn.

The decline in production, which started in May 2008, was reversed in March 2009.

* Russian oil output grew by around 1.5 percent in 2009 to the then post-Soviet high of an average of 9.925 mbpd for the year and exceeded monthly 10 mbpd level for the first time since the collapse of the Soviet Union in September.

Russia in 2010 overtook Saudi Arabia, which restrains its output when it deems it necessary, as the world’s largest producer as new fields were launched, including Vankor, Uvat and Talakan.

Russia, whose proceeds from oil gas constitute around half of budget revenues, aims to keep its crude production at no less than 10 million bpd until 2020.

The Kremlin has increased its share in the oil industry to over 50 percent after top oil producer Rosneft clinched an agreement to acquire Anglo-Russian TNK-BP for around $55 billion in a cash-and-stock deal.

After the acquisition, expected to be completed in the first half of this year, Rosneft will become the world’s largest oil producer with hydrocarbon output of some 4.6 million barrels of oil equivalent per day.

In tonnes, Russia’s crude production was 518.018 million last year, the ministry said, up from 511.432 million tonnes in 2011, which was one day shorter than 2012.

In December, Russia’s oil production edged down to 10.48 million bpd from 10.50 million in November, a post-Soviet high.

Rosneft reported one of the largest rises in crude output among the Russian oil majors last year, with an increase of 2.3% to 117.473 million tonnes (2.4 million bpd) on a daily basis thanks to increased production at its East Siberia’s Vankor field to 367,000 bpd.

Lukoil has tried to increase its exposure to overseas oil deposits as it has been unable to offset a production decline at its mature West Siberian oilfields. It owns 75% of Iraq’s huge West Qurna-2 deposit.

Saudi Arabia has restrained its output to steady oil prices, which reached a record high last year.

Brent crude averaged over $111 a barrel in 2012, the highest on record. The international benchmark gained 3.5 percent for the year, after rising 13.3 percent in 2011.

The windfall has helped oil production in Russia, where the extent of the crude output rise surprised many analysts. Moscow hopes the momentum will continue with so-called tight oil, hidden in layers of rock.

However Russia has yet to follow the United States in deploying advanced horizontal drilling and hydraulic fracturing technologies, which is known as fracking, on a commercial scale.

Last month, Rosneft has agreed with ExxonMobil to tap the shale oil in West Siberia.

Decline In 2013?

The International Energy Agency (IEA) expects non-OPEC supplies to grow by 900,000 bpd to 54.17 million bpd in 2013, taking total consumption up to an average of 90.52 million bpd, while production in Russia will decline.

“We expect Russia’s crude production to be lower by around 100,000 barrels per day in 2013 mainly because brownfield production declines should outpace greenfield supply growth,” IEA’s supply analyst Michael Cohen told Reuters.

Brownfield, or established, oil production in Russia accounts for over 80% of total output.

The far-flung deposits of East Siberia are viewed as vital in offsetting declining production in West Siberia. Last month, Russia completed an expansion of its Asian oil pipeline to the Pacific Ocean, filled by crude from East Siberia.

The oil resources at Russia’s offshore fields – estimated at 100 billion tonnes of oil equivalent – are also seen as the next source of domestic oil production. Most are in the Arctic where only state-owned companies, such as Rosneft, have access.

Daily gas production in Russia jumped 10.4 percent, month-on-month, to 2.12 billion cubic metres (bcm) in December thanks to a rise in seasonal demand.

Gas production for 2012 declined to 1.79 bcm from 1.84 bcm in 2011 on a daily basis. Gas output from Gazprom, the world’s leading producer, decreased in 2012 to 1.31 bcm a day from 1.4 bcm in 2011 on the back of a decline in demand from Europe.